Professional Documents
Culture Documents
Bitcoin Testimony - Mark T Williams April 1 2014
Bitcoin Testimony - Mark T Williams April 1 2014
of
Mark
T.
Williams1
Banking
Specialist,
Commodities
and
Risk
Management
Expert
Boston
University
Finance
Department
To
U.S.
House
of
Representatives
Committee
on
Small
Business
April
2,
2014
Hearing
Bitcoin:
Examining
the
Benefits
and
Risks
for
Small
Business
Rayburn
House
Office
Building,
Washington,
DC
20515
Introduction
committee
members.
My
name
is
Mark
Williams
and
for
the
last
12
years
I
have
been
on
the
Finance
faculty
of
Boston
University
where
I
have
specialized
in
banking,
capital
markets
and
risk
management
related
matters.
In
2010,
I
wrote
Uncontrolled
Risk,
a
book
about
the
fall
of
Lehman
Brothers
and
what
caused
the
2008
real
estate
asset
bubble
www.uncontrolledrisk.com.
Prior
to
my
academic
career,
I
was
a
senior
executive
for
a
Boston-based
commodity-trading
firm
and
have
worked
as
a
field
examiner
for
the
Federal
Reserve
Bank
in
San
Francisco
and
Boston.
On
occasion,
I
have
also
been
a
consultant
to
small
businesses.
Through
my
academic
and
work
experiences
I
have
gained
a
strong
understanding
of
how
the
capital
markets
function,
the
role
of
currency,
how
1
Mark
T.
Williams
has
only
a
de
minimis
financial
interest
in
Bitcoin
and
no
direct
investment
in
Bitcoin-related
startups.
For
the
last
18
months,
I
have
closely
studied,
researched,
and
more
recently
written
on
Bitcoin,
its
structure
and
its
highly-risky
nature.
I
appreciate
the
opportunity
to
testify
today
and
I
view
this
committee
room
as
an
extension
of
the
Boston
University
classroom.
My
interest
and
fascination
with
Bitcoin
started
in
2011.
Initially
it
was
part
of
an
in-class
lecture,
later
a
homework
assignment,
and
ultimately,
morphed
into
a
full
classroom
debate.
At
that
time,
Bitcoin
was
trading
for
32
cents.
Over
the
last
three
years,
this
pseudo
currency
has
taken
on
a
life
of
its
own.
In
2013
its
speculative
value
increased
from
$13
to
a
market
high
of
$1,200.
Most
Recent
Events
One
month
or
even
one
week
in
the
Bitcoin
world
can
be
equivalent
to
a
decade
in
other
markets.
The
price
risk
associated
with
Bitcoin
is
extreme
and
unlike
any
other
volatile
commodity.
Despite
the
dramatic
rise
in
2013,
prices
have
not
been
a
one-way
space
rocket
to
the
moon.
Since
November
2013,
Bitcoin
has
slid
by
over
60
percent
to
$462.2
Chinas
decision
on
December
5,
2013
to
prohibit
its
banks
and
money
transmitters
from
accepting
Bitcoin
was
the
pin
that
has
begun
to
prick
the
Bitcoin
Bubble.3
On
this
date,
the
worlds
second
largest
economy
warned
that
virtual
currencies
carry
substantial
risk.4
Other
market
disruptions
have
occurred.
On
January
19,
2014
Alibaba,
the
Chinese
equivalent
of
Amazon
stopped
accepting
Bitcoin.
Two
weeks
later,
Charlie
Shrem,
the
Vice
Chairman
of
the
Bitcoin
Foundation,
located
a
stone
throw
from
these
Chambers,
was
indicted
by
the
FBI
for
money
laundering.
Then
on
February
6,
2014,
Russia
declared
the
use
of
Bitcoin
illegal
stating
that
the
Ruble
was
the
sole
official
currency.
That
same
week,
Mt
Gox
of
Japan,
formerly
the
worlds
largest
Bitcoin
exchange,
accounting
for
80
percent
of
trading
volume,
announced
it
had
been
hacked,
and
later
disclosed
customer
losses
of
more
than
$400
million.
The
other
two
major
exchanges,
Bitstamp,
located
in
Slovenia
and
BTCe,
located
in
Bulgaria,
were
also
impacted
by
this
attack.
The
scale
and
scope
of
the
Mt
Gox
virtual-
bank
heist
further
rattled
market
confidence,
raising
new
questions
about
safety
and
the
need
for
basic
consumer
protection
standards.
In
February,
cyber
hackers
broke
into
Silk
Road,
the
defunct
deep-web
purveyor
of
illegal
goods
and
services,
stealing
over
$2.7
million
worth
of
e-coins,
proving
that
criminals
can
also
steal
from
criminals.
3
On
December
4,
2013,
former
Federal
Reserve
Bank
Chairman
Alan
Greenspan
indicated
publically
that
Bitcoin
was
a
bubble.
4
China
on
December
5,
2013
declared
that
Bitcoin
was
not
a
virtual
currency
but
a
virtual
commodity.
released
a
stern
warning
to
investors
about
the
dangers
of
buying
and
using
virtual
currencies.
Shortly
after,
on
March
24,
2014,
the
Internal
Revenue
Service
dealt
a
further
blow
to
Bitcoin,
ruling
it
is
not
a
foreign
currency
but
should
be
taxed
as
property.
This
IRS
ruling
gives
investors
with
a
low-cost
basis
an
added
incentive
to
hoard
coins
instead
of
using
them
for
transactional
purposes.
This
further
diminishes
the
already
low
level
of
market
liquidity.
Casting
more
doubt
on
the
prospects
of
Bitcoin,
on
March
14,
2014,
famed
investor
Warren
Buffett
stated
Stay
away.
Bitcoin
is
a
mirage.
His
comments
supported
remarks
made
by
Charlie
Munger,
Vice
Chairman
of
Berkshire
Hathaway
a
year
earlier,
when
Munger
declared
Bitcoin
rat
poison.5
Despite
these
significant
market
disruptions,
scandals
and
pessimistic
comments
made
by
well-respected
investors,
Bitcoin
promoters
continue
to
trumpet
the
virtues
of
this
volatile,
nationless
and
anonymous
currency.
Some
advocates
have
declared
this
period
as
the
Bitcoin
Revolution
(2000s),
equivalent
to
the
early
stages
of
the
internet
(1990s).
Although
I
do
not
view
Bitcoin
as
rat
poison,
this
virtual
currency
does
pose
significant
risks
to
small
business
owners.
These
risks
need
to
be
carefully
domestic
product
and
employment.
Since
the
1970s,
small
businesses
provide
55
percent
of
all
jobs
and
66
percent
of
all
net
new
jobs.
Businesses
that
are
willing
to
adopt
and
utilize
new
technology,
such
as
virtual
currencies,
may
gain
a
distinct
competitive
advantage
(e.g.,
cost
savings,
increased
sales)
over
their
competitors.
However,
blindly
adopting
technology
without
understanding
the
full
risk
implications
can
be
hazardous
to
a
companys
financial
health.
Bitcoin
is
an
example
of
new
technology
that
has
clear
promise,
but
also
poses
a
multitude
of
risks
for
both
businesses
and
consumers.
In
my
testimony
today
I
will
not
focus
on
the
promise
of
virtual
currencies
as
I
will
leave
that
to
the
other
hearing
witnesses.
Instead
my
focus
will
be
on
the
significant
and
currently
unaddressed
risks
associated
with
Bitcoin.
Sound
business
and
regulatory
decisions
can
only
be
made
when
Bitcoin
Price
$1,400.00
$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$-
7/17/2010
7/17/2011
7/17/2012
7/17/2013
In
2009,
annual
volatility
was
approximately
160
percent.
Using
price
data
from
2010
forward
from
Mt
Gox,
Bitstamp
and
BTCe,
annual
volatility
through
2014
was
approximately
140
percent.
7
8
All
asset
bubbles
are
similar
in
that
they
have
three
phases:
growth,
maturity
and
pop.
However,
not
all
asset
bubbles
see
prices
collapse
during
the
final
phase;
sometimes
prices
deflate
over
an
extended
period
allowing
investors
to
experience
lower
losses
and
softer
landings.
Bitcoin
entered
the
growth
stage
in
2011,
the
maturity
stage
in
2013
and
now
is
in
the
pop
stage.
Since
December
2013
rapid
price
swings
continue
to
demand
that
owners
watch
prices
on
a
daily
and
even
hourly
basis.
If
small
business
owners
are
willing
to
accept
Bitcoin
they
need
to
stay
vigilant
in
monitoring
the
high
probability
of
a
pronounced
price
collapse.
In
December
2013,
when
prices
were
still
over
$1,000,
I
indicated
that
Bitcoin
could
drop
to
$10
or
below
(http://cognoscenti.wbur.org/2013/12/05/bitcoincurrency-mark-t-williams).
This
prediction
was
based
on
several
observations
including
the
underlying
option
value
of
this
new
and
uncertain
technology,
price
level
at
the
start
of
2013
and
the
percentage
price
drop
associated
with
the
1637
Tulip
Mania
Bubble9.
On
January
24,
2014,
Nobel
prize-winner
economist
Robert
Shiller
stated
it
is
a
bubble,
there
is
no
question
about
it
its
just
an
amazing
example
of
a
bubble.
As
articulated
by
Coinbase,
as
part
of
its
new
customer
disclosure
statement,
business
owners
have
to
be
prepared
for
the
chance
that
Bitcoin
prices
could
drop
to
zero.
9
BitPay
has
a
four
tier
customer
structure
with
fees
ranging
as
low
as
1
percent
of
transaction
value
to
monthly
fees
of
up
to
$3,000
for
extremely
large
transactions.
Since
December
2013,
there
have
been
several
days
where
daily
intra
and
inter-day
price
movements
have
exceeded
10
percent,
increasing
to
15,
20
percent
or
more.
Business
owners
can
also
sell
coins
and
open
e-wallets
through
Bitcoin
exchanges.
Since
Mt
Gox
trading
was
halted
on
February
7th,
2014,
and
its
subsequent
bankruptcy
two
weeks
later,
the
bulk
of
Bitcoin
trading
has
been
concentrated
in
the
hands
of
two
exchanges:
Bitstamp
and
BTCe.
To
sell
on
these
exchanges,
U.S.
small
businesses
must
send
instructions
and
trust
that
their
requests
will
be
honored.
These
exchanges
operate
under
no
regulation
and
are
outside
of
the
reach
of
U.S.
regulators.
With
no
regulatory
oversight,
it
is
not
unusual
for
certain
well
connected
buyers
and
sellers
to
gain
preferential
treatment
in
terms
of
price
execution.
Front-running
is
not
uncommon.12
In
a
weak
corporate
governance
environment
are
customer
funds
adequately
protected
from
internal
or
external
fraud?
In
this
wild-
west
atmosphere
many
exchanges
have
failed.
It
is
estimated
that
of
the
40
Bitcoin
exchanges
that
have
been
started
since
the
inception
of
Bitcoin,
almost
half
(18)
have
failed.13
When
exchanges
close,
customers
tend
to
lose
everything.
In
November
2013,
GBL,
based
in
Hong
Kong,
closed
its
doors,
costing
investors
over
$4
million.
In
December
2013,
the
European
Banking
Authority
also
warned
of
the
dangers
of
other
exchanges
failing
and
of
the
lack
12
Practice
of
a
self-interested
firm
executing
trades
in
its
own
account
after
having
advanced
market
information,
sometimes
trading
at
the
detriment
of
the
customer
positions.
13
Moore,
Tyler,
Christin,
Nicolas,
Beware
the
Middleman:
Empirical
Analysis
of
Bitcoin-Exchange
Risk,
2013
Unlike
legal
tender,
Bitcoin
has
been
designated
for
tax
purposes
as
property.
This
distinction
is
significant.
Unlike
legal
tender,
when
accepting
Bitcoin,
business
owners
can
be
subject
to
additional
taxes
associated
with
the
gains
---the
difference
in
value
on
date
received
versus
value
on
date
sold.
On
March
25,
2014,
IRS
issued
a
ruling
that
clarified
the
tax
treatment
of
Bitcoin
but,
in
doing
so,
created
greater
uncertainty
about
the
e-coins
future.
Bitcoin
is
now
taxed
as
property
and
not
as
foreign
currency.
Any
gains
in
Bitcoin
value
is
taxed
as
ordinary
income
(as
high
as
39.6
percent)
or
at
the
capital
gains
(20
percent)
tax
rate.
Given
the
high
price
run-up
of
Bitcoin
during
2013,
there
are
significant
tax
considerations
which
also
influence
the
level
of
hoarding
versus
spending.
If
an
e-coin
was
purchased
for
$250
and
it
now
trades
for
$500,
the
owner
is
going
to
be
less
motivated
to
use
it
for
transactional
currency
purposes,
especially
if
doing
so
would
trigger
an
additional
tax
event.
For
holders
of
Bitcoin,
this
IRS
ruling
reduces
the
incentive
to
use
e-coins
for
transactional
purposes,
reducing
transaction
flow,
coins
were
hoarded.
It
is
highly
plausible
this
tax
ruling
will
encourage
even
more
hoarding.
Small
business
owners
are
now
confronted
with
several
other
tax
risks.
If
they
decide
to
accept
and
retain
Bitcoin,
they
will
need
to
keep
records
of
the
market
price
on
the
day
received
and
sold.
Any
increase
in
value
from
that
date
forward
would
be
subject
to
income
tax.
If
a
merchant
decided
to
pay
its
employees
in
Bitcoin,
the
firm
also
needs
to
withhold
the
required
employment
tax
in
U.S.
dollars.
Companies
that
pay
employees
in
Bitcoin
are
also
subjecting
staff
to
increased
tax
risk
should
coins
appreciate
in
value
or
if
prices
drop.
Such
a
policy,
given
Bitcoins
extreme
daily
price
volatility,
would
unfairly
penalize
employees.
8. Transaction
Fraud
Risk
Double
Spending
Under
Bitcoin
protocol
all
new
transactions
are
validated
through
the
blockchain,
a
public
ledger
that
is
independently
verified
every
10
minutes.
Validation
is
done
to
avoid
a
situation
where
a
customer
is
able
to
fraudulently
double-spend
this
e-coin.
However,
this
10
minute
window
poses
potential
risk
should
two
businesses
be
paid
with
the
same
Bitcoin.
If
a
double-spending
incident
occurred
during
this
time
gap,
the
last
merchant
to
report the transaction would have little recourse to collect on this payment.14
That
merchant
would
then
lose
the
value
of
the
product
or
services
sold.
If
the
customer
had
used
a
credit
card
and
not
Bitcoin
to
commit
the
fraud,
the
business
would
have
had
recourse
through
the
credit
card
company.
One
way
merchants
can
attempt
to
mitigate
this
risk
is
by
waiting
until
a
full
validation
is
completed
before
permitting
customers
to
receive
goods
or
services.
9. Bitcoin
Slow
Transaction
Speed
Increases
Credit
Risk
Credit
cards
such
as
Visa
and
MasterCard
have
higher
upfront
charges
for
small
businesses;
however,
the
transaction
speed
of
the
credit
card
network
is
superior
to
the
existing
transaction
speed
of
Bitcoin.
At
point-of-
sale,
it
still
remains
faster
and
more
convenient
for
customers
to
swipe
a
card
or
input
the
card
number
on
an
internet
e-commerce
site
than
it
is
to
use
Bitcoin.
The
process
of
copying
and
pasting
an
e-coin
alphanumeric
string
into
another
program
and
waiting
for
the
confirmation
is
cumbersome
and
time-consuming.
Merchants
are
also
much
more
accustomed
to
receiving
a
point-of-sale
credit
card
authorization
and
receipt
within
seconds
of
sale.
With
Bitcoin,
merchants
remain
exposed
if
they
deliver
product
or
services
before
payment
confirmation
is
fully
verified.
14
Although
the
Bitcoin
community
has
indicated
that
double-spending
events
are
rare,
and
controls
against
it
are
strong,
merchants
still
need
to
be
prepared
should
such
fraud
be
committed.
BItcoin
advocates
claim
that
in
the
future
the
Bitcoin
payment
network
will
be
much
quicker
than
the
existing
credit
card
network.
However
in
2014,
transaction
processing
time
for
Bitcoin
remains
much
slower
as
measured
in
time
to
confirmation.
Some
businesses
to
gain
maximum
control
have
taken
paper
copies
of
private
keys
and
placed
them
in
locked
boxes.
E-wallets
can
also
be
taken
off
line.
This
control
technique
is
called
cold
storage.
17
These
secrecy
features
also
raise
the
question
of
what
business
need
these
benefits
unless
they
have
something
they
want
to
hide.
faster
and
cheaper
form
of
payment
than
existing
forms
including
credit
cards.
These
claims
have
yet
to
be
fully
proven.
b) Facilitating
Commerce
It
is
widely
known
that
businesses
can
increase
sales
by
expanding
the
availability
of
customer
payment
options.
Credit
cards
remain
the
primary
form
of
payment
used
by
consumers
when
entering
brick
and
mortar
businesses
or
when
shopping
online.
Unlike
cash
or
debit
cards,
credit
cards
facilitate
greater
purchasing
by
delivering
a
fast,
short-term
loan
to
consumers.
In
a
cash
only
economy,
businesses
would
not
sell
as
many
products
or
services,
and
profits
would
fall.
Credit
cards
also
increase
impulse
buying.
To
encourage
even
greater
purchasing,
some
credit
card
companies
establish
reward
programs,
enhance
product
warranties
and
provide
free
loss/damage
insurance
on
products
purchased.
In
addition
to
credit
cards,
PayPal
makes
it
convenient
for
customers
by
providing
the
option
of
quickly
transferring
money
from
either
personal
bank
accounts
or
credit
cards.18
PayPal
has
made
significant
inroads
into
e-commerce,
now
representing
18
percent
of
the
market
or
$315.3
million
in
daily
payment
activity.
The
cost
of
processing
plastic
is
higher
and
small
businesses
attempt
to
manage
higher
fees
especially
on
smaller
purchased
items
by
imposing
credit
card
minimums
or
by
establishing
a
cash
or
credit
card
price.
The
average
18
The
predecessor
company
to
PayPal
was
founded
in
December
1999.
On
October
3,
2002,
PayPal
became
a
wholly
owned
subsidiary
of
eBay.
the
last
year,
small
businesses
have
also
gained
greater
relief
from
credit
card
fees.
Since
January
27,
2013,
U.S.
merchants
have
been
permitted
to
pass
on
to
consumers
a
surcharge
when
using
a
credit
card.
Presently,
few
merchants
have
exercised
this
right.
Small
businesses
have
also
received
meaningful
fee
relief
when
accepting
debit
cards.
Since
the
Dodd
Frank
Act
and
with
the
adoption
of
the
Durbin
Amendment,
per-swipe
fees
have
dropped
by
about
50
percent
to
21
cents.
This
cost
savings
of
an
estimated
$8
billion
per
year
has
been
advantageous
to
small
business.
c) Credit
Cards
Fees
Come
With
Merchant
Benefits
Credit
cards
have
fees
but
with
these
fees
come
services
and
benefits
to
both
merchants
and
customers.
Consumers
using
credit
cards
are
more
likely
to
spend
than
those
who
only
have
cash.
Business
owners
at
point-of-sale
receive
instantaneous
assurance
that
a
card
is
valid
and
its
owner
has
sufficient
funds
available
to
make
a
purchase.
Credit
card
companies
also
work
with
merchants
to
reduce
the
chance
of
fraudulent
purchases.
Consumer
sales
are
increased
through
the
use
of
loyalty
program,
enhanced
guarantees
and
damage
insurance.
As
a
financial
middleman,
credit
card
companies
also
handle
dispute
resolution,
gathering
facts
from
merchants
and
customers.
The
chargeback
protection
(disputed
purchases)
also
increases
the
likelihood
of
credit
card
use
and
thus
a
greater
number
of
purchases.
d) Evolving
Payment
Landscape
Business
Transactions
Currently,
two-thirds
of
all
point-of-sales
transactions
in
the
U.S.
are
completed
either
with
credit,
debit
or
gift
cards.
A
little
over
twenty-five
percent
of
sales
are
completed
with
cash
and
this
rate
is
projected
to
decline
to
only
23
percent
by
2017.19
Technology
continues
to
make
it
easier
for
merchants
to
accept
credit
card
transactions
as
older
swipe
machines
and
dedicated
phone
lines
continue
to
disappear.
Innovative
firms
such
as
Square,
WePay
and
PayPal
are
making
it
more
convenient
to
accept
plastic
or
to
make
bank
account
direct
transfers.
There
is
also
significant
growth
in
the
use
of
prepaid
cards.
In
2013,
Starbucks
reported
that
one-third
of
the
companys
U.S.
sales
or
$2.5
billion
was
conducted
through
this
payment
method.
Annually,
over
$65
billion
in
U.S.
sales
is
conducted
through
prepaid
cards.
This
convenient
and
inexpensive
payment
method
is
projected
to
double
in
consumer
use
in
the
next
two
years.
19
20
McClue,
TJ.,
Why
Dont
More
Small
Businesses
Accept
Credit
Cards,
Forbes,
August
16,
2013.
IRS
requires
payment
processors
to
annually
file
form
1099-k,
a
record
of
system
transaction
history.
21
Bitcoin.
b. Reduce
Transaction
Costs
and
Gain
New
Customers
-
Bitcoin
represents
a
new
possibly
less
expensive,
private
payment
form
to
sell
goods
and
services
and
possibly
expanding
sales
by
reaching
new
customers.
How
do
Small
Businesses
Obtain
Bitcoin?
Additional
Background
There
are
over
190
virtual
currencies
traded
in
the
marketplace
totaling
$6.5
billion
in
stated
value.
http://coinmarketcap.com/mineable.html.
Of
these
traded
e-currencies,
Bitcoin,
is
the
dominant
player
representing
about
$6
billion
or
92
percent
of
this
total
stated
value.
In
2009,
a
programmer
by
the
pseudonym
Satoushi
Nakamoto22
supposedly
designed
Bitcoin,
a
computer
generated
virtual
currency
produced
by
solving
progressively
complex
mathematical
equations.23
The
code-protocol
for
Bitcoin
is
open
source,
allowing
it
to
be
easily
viewed,
commented
on
and
if
a
majority
of
programmers
agree,
changes
are
adopted.
In
this
regard,
Bitcoin
is
very
transparent.24
Bitcoin,
the
pseudo
currency
and
Bitcoin,
the
low-cost
payment
system,
are
dependent
on
each
other
and
are
inseparable.
Bitcoin
is
the
locomotive
while
the
payment
system
is
the
track
that
allows
it
to
move
back
and
forth.
The
Bitcoin
infrastructure
is
decentralized
and
based
on
a
peer-to-peer
structure.
Individuals
in
a
22
In
March,
Newsweek
presented
facts
in
an
attempt
to
prove
the
founder
is
Dorian
S.
Nakamoto
who
currently
lives
east
of
Los
Angeles.
When
confronted
by
reporters,
Mr.
Nakamoto
denied
having
any
connection
with
the
creation
of
Bitcoin.
23
Bitcoin
has
not
been
recognized
by
any
of
the
G20
countries
as
meeting
the
definition
of
currency
as
it
lacks
price
stability
and
does
not
provide
a
stable
store
of
value.
As
a
result
it
is
a
speculative
virtual
commodity
with
no
tangible
value.
24
The
Bitcoin
community
has
argued
that
this
open
source
unregulated
peer-to-peer
approach
is
a
strong
control
as
it
allows
a
large
community
of
computer
scientists,
software
engineers
and
cryptologists
to
watch
over
the
system
and
insure
its
integrity.
generated
globally
per
day.
Currently
over
12.3
million
Bitcoins
have
been
minted
and
by
year
2140,
the
21
million
limit
will
be
reached.
A
preset
quantity
limitation
creates
scarcity
which
puts
upward
pressure
on
price.
This
is
especially
true
as
long
as
new
investors
can
be
recruited
to
buy
newly
minted
e-coins.
Although
commodity
scarcity
is
dictated
by
predetermined
rules,
it
is
unclear
what
mechanism
or
controls
are
in
place
to
guarantee
that
rules
will
be
followed
and
that
incentives
to
cheat
the
system
will
be
eliminated.
Theoretically,
the
Bitcoin
mining
and
authenticity
process
is
decentralized,
keeping
collusion
between
miners
to
a
minimum.25
As
new
e-
coins
are
minted
they
are
added
to
the
blockchain
and
when
trades
occur,
existing
e-coins
are
authenticated
against
this
blockchain.
As
more
Bitcoins
are
mined,
the
blockchain
grows
longer
in
complexity
and
the
verification
time
increases.
In
February
2014,
a
series
of
cyber-attacks
occurred
on
the
Bitcoin
infrastructure,
targeting
three
of
the
largest
exchanges,
resulting
in
significant
trading
disruption.
While
the
integrity
of
the
blockchain
remained
intact,
several
third-party
vendors
were
significantly
impacted.
Mt
Gox
eventually
filed
bankruptcy
and
the
other
two
largest
exchanges,
Bitstamp
25
However,
in
practice,
as
prices
have
skyrocketed,
there
has
been
a
greater
economic
incentive
for
miners
to
band
together
in
pursuit
of
increased
profits.
As
a
result,
this
remains
a
clear
weakness
in
the
Bitcoin
infrastructure.